Ruling and opposition party lawmakers constituting the Strategy and Finance Committee of the National Assembly severely criticized the expansionary fiscal and economic policy of Deputy Prime Minister Choi Kyung-hwan during the parliamentary inspection of the Ministry of Strategy and Finance on Oct. 16.
“The sum of the sovereign, public, and pension debts reached 1,641 trillion won as of the end of last year, which was equivalent to 114.9 percent of the national GDP,” said ruling Saenuri Party lawmaker Lee Han-koo, adding, “This is greatly over the WEF recommendation of 90 percent, and I am dubious about whether the government can endure the current fiscal deficit and debt surge, with the aging of society speeding up, and large monies expected to be taken for inter-Korean reunification.”
The government has claimed that the size of the sovereign debt is not problematic because it is lower than the OECD average. However, according to lawmaker’s data, the total liabilities amounted to 94 percent of the GDP, 1.252 quadrillion won (US$1.176 trillion) to be specific, in as early as late 2011. Besides, the household liabilities reached a new high of 1.242 quadrillion won (US$1.166 trillion) in late June this year, and the ratio of household debt to nominal GDP has gone up from 82.4 percent to 83.8 percent, and then to 85.3 percent between 2011 and 2013, to remain much higher than the recommendation of the WEF at 75 percent.
“The OECD, S&P, former Bank of Korea governor Lee Sung-tae, and many more are warning about the pace at which household liabilities increase,” the lawmaker pointed out, continuing, “Only the Korean government, the current central bank governor and Deputy Prime Minister Choi Kyung-hwan are not worried about the debt situation.”
Democratic United Party lawmaker Hong Jong-hak said in the meantime, “Putting pressure on the central bank to cut the key rate is to mobilize the Bank of Korea for the government’s economic stimulation policy, which harms the independence of the central bank.” The bank had lowered the benchmark rate on the previous day.
“It seems that the loan-to-value and debt-to-income ratios were eased too rapidly,” ruling Saenuri Party lawmaker Park Myung-jae criticized, adding, “When mortgage loans are used for everyday living and business, the default rate will go up and household debts will swell.”